What is a Professional Employer Organization (PEO)?
A Professional Employer Organization or PEO is a co-employment organization that lets foreign companies hire and outsource roles overseas. These companies set up an agreement with PEOs that undertake practically every business process that needs to be carried out for outsourcing, including:
- Recruitment, hiring, and onboarding
- Drafting compensation packages and implementing payroll processing
- Administering statutory and supplementary benefits
- Guaranteeing compliance with local employment practices
Companies hiring overseas sign joint-employment agreements with PEOs, which means responsibilities are shared between parties. This includes liabilities in the management of remote employees. Many companies choose to sign with PEOs so they can efficiently and compliantly follow local labor laws pertaining to HR-related functions in the country in which they want to outsource. This, in turn, allows them to focus on other business areas, such as building remote teams.
Without signing on with PEOs, companies looking to outsource in the Netherlands would usually need to muster compliance teams in-house. Additionally, these same teams would either be able to do the same when the company expands to other countries or scale at the same rate. This is why finding the right PEO partner is a strategic priority when it comes to outsourcing.
If you’re interested in retaining remote employees in the Netherlands, you’re probably keen on the country’s bustling and open economy, its low unemployment rates, and its stable industries. The Netherlands’ economic freedom score ranks it the fifth out of 45 countries in Europe. Overall, it sits well above regional and global averages. Though it was gravely affected by the COVID-19 pandemic, the Dutch economy has already bounced back after 2021. It’s no small wonder that its 9.5 million strong workforce is highly sought after not only in its domestic markets but also by foreign companies.
One major obstacle to working with remote workers in the Netherlands, however, is the crucial component of local labor law compliance. This is where PEOs become a strategic solution that addresses this foremost concern.
What are the benefits of using a PEO in the Netherlands?
Offloading work- and time-intensive HR management and administration tasks to a reliable partner shares many of the same inherent benefits as any outsourcing endeavor. When it comes to working with a PEO in the Netherlands, however, the nuanced benefits of guaranteed compliance stand out:
- Ensuring compliance with local labor laws: Labor laws in the Netherlands cover nearly every aspect of employment practice. This includes anything from background checks and recruitment to more complex concerns such as intellectual property transfers and details of termination. Consequently, running afoul of these mandatory guidelines can open up foreign companies to a lot of legal fees and penalties, and PEOs ensure that they run HR processes compliant to statutory requirements.
- Payroll processing and tax filing: Not only can payroll processing and required tax filing be complicated, they are also strictly governed by local labor laws due to the importance of their function. A PEO in the Netherlands doesn’t just ensure payments are made accurately and on time. It also ensures that these detailed processes run smoothly and in complete compliance to local labor laws. This includes everything that impacts payroll and tax—benefits administration, leave policy, taxation legislation, and more.
- Risk mitigation: A PEO in the Netherlands offers an HR management and payroll platform that is compliant with local labor laws, but foreign companies often need more than that. That’s why a reliable PEO can also offer legal guidance and advice when their partners need it. This is how PEOs act as a shield, protecting their foreign clients from an inherent compliance risk when outsourcing.
- Administration of competitive benefits: Local employment legislation in the Netherlands outlines specific mandatory benefits that employees are entitled to, PEOs ensure that their clients are compliant with these requirements as well. Beyond that, PEOs can also offer assistance in extending supplementary benefits to create a more compelling compensation package and attract the top talent.
- Employment cost mitigation: Managing HR administration as well as compliance can amount to a lot of overhead. Centralizing all of these under one roof and through a single, reliable PEO can mitigate a lot of the costs that would otherwise need to be shouldered in-house.
Partner with Skuad’s services in the Netherlands so you, too, can reap these benefits and reallocate precious business resources on the task of scaling your company.
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What are the differences between an EOR and a PEO?
An alternative to a PEO, an Employer of Record (EOR) also lets foreign clients enter an employment arrangement and hire remote teams and manage HR processes. Of course, there are some key differences between the two. In general and from a top-level perspective:
|An EOR is the legal employer for any hired workers — not its client.
||PEOs and their clients are co-employers, flexibly splitting and sharing liabilities and responsibilities between them.
|As the sole legal employer, EORs handle all the HR processes and functions required for ongoing engagement with hired workers from onboarding to payroll.
||PEOs can flexibly extend what HR functions and processes they handle as they essentially share these with their clients. In effect, clients can dictate a PEO’s involvement in HR management.
|EORs hire on behalf of their clients, so the clients themselves do not need to register a local entity for HR purposes.
||PEOs are co-employer, so clients need to establish a local legal entity that can legally hire employees.
|Performs all contract and agreement drafting on behalf of their clients.
||Clients perform contract and agreement drafting with assistance, where required.
Hiring in the Netherlands with a PEO
The Netherlands’ highly developed infrastructure bolstered by economic advancement and even its geographical location make it appealing as a foreign investment destination. Many European and non-European companies have long-since recognized the benefits of conducting business in the Dutch economy, typically via hiring employees.
However, taking advantage of top candidates in the Netherlands means successfully navigating local employment legislation in the country.
Employment practices in the Netherlands are governed by local labor laws, collective agreements, and contract specifics. Existing labor law provisions in the Netherlands can be too complex to handle in-house, and are expected to become even more complicated in the coming years. Changes are expected to be influenced by post-pandemic measures and promises from the government regarding the implementation of new employment legislation. This presents foreign companies further reasons to partner with a provider like Skuad.
Let Skuad’s services in the Netherlands jumpstart your efforts in building globally distributed teams in full compliance with local labor laws.
Payroll in the Netherlands is challenging. It’s easy when you use a PEO.
Even among the many aspects of labor practices governed by mandatory guidelines in the Netherlands, payroll processing is tedious and complicated. It deals in sensitive information and financial data, and is the fundamental basis of the working relationship between you and your employee. This means any errors or delays in payroll translate to strained professional relationships, not to mention potential penalties levied due to noncompliance with local labor laws.
Understandably, running payroll in the Netherlands in-house is a daunting challenge for many foreign employers.
Nearly every facet of payroll processing involves statutory components that require in-country expertise to reliably adhere to, without error. Taxation specifics, benefits administration, leave policy—all of this is influenced directly or indirectly by local labor laws in the Netherlands. And noncompliance can lead to hefty legal costs.
Often, foreign companies that attempt to wrangle all compliance concerns in-house end up being bogged down, their growth hampered by allocating resources to something so detailed and work-intensive. Finding the right PEO to help alleviate the burden is a popular strategic alternative. Skuad’s global HR management and payroll processing platform addresses all of these concerns and more, in total compliance with local labor law in the Netherlands.
Request a demo from Skuad’s experts to find out more.
What a PEO in the Netherlands can and cannot do for you
Signing a co-employment agreement with a PEO and splitting responsibilities when it comes to HR processes might be too much to ask from a company without clearly understanding what it means. Here’s a brief overview of the most important concepts:
A PEO can
- Run seamless payroll processing and management for remote teams in the Netherlands and other markets
- Help with recruiting, onboarding, and management of talent in the Netherlands
- Mitigate overhead costs that come with managing globally distributed teams while also shielding clients from compliance risks
A PEO cannot
- Recruit employees as the sole legal employer on behalf of your company
- Take full control of your company
- Be responsible as the sole decision-maker for hiring and terminating your employees
Businesses big and small can find value in partnering with a PEO in the Netherlands.
The basic foundation of building remote teams in the Netherlands is firm and in-depth knowledge of local labor practices. Few foreign companies can muster the capability to handle that in-house. This is especially true if they want to expand into other markets beyond the Netherlands.
Relying on a trusted PEO in the Netherlands opens up a world of possibilities by offloading these compliance responsibilities to them, letting you focus on other important areas of business. A PEO can protect you from non-compliance risk while also offering streamlined, centralized HR infrastructure to greatly expand your capacity for growing your organization.
Skuad’s centralized HR and payroll processing services removes a lot of the stress in building globally distributed teams. Skuad empowers you to easily hire, onboard, manage, and pay employees in the Netherlands while staying 100% compliant with local labor laws. Book a demo with Skuad today.